At a time when new commercial development in Manhattan is at a virtual standstill, exceptions can be found in West Chelsea and the Meatpacking District, where builders are bucking the trend with a host of boutique office projects, capitalizing on a vacancy rate for Chelsea that has dropped nearly in half in the past year.
At least six small office projects are under way, while others are planned for a pair of neighborhoods normally associated with boutique retail shops, expensive housing, and art galleries. The projects may help alleviate a shortage of space in a Manhattan office market which has seen a precipitous drop in availability, a clear indication that corporate tenants looking for an edgy alternative to locations like Midtown have embraced the area.
According to brokerage Colliers ABR, commercial availability in Chelsea dropped by nearly half in 2005, from 10.6 percent in January to 5.7 percent 12 months later, while Class B availability plummeted from 13.3 percent to 4.7 percent over the same period.
“There are no large blocks of space in the prime Chelsea area. Over the past 12 months the supply has diminished to none,” said CB Richard Ellis vice president Brian Gell, who represents 111 Eighth Avenue, a mammoth 2.8-million-squarefoot office building between 15th and 16th streets. Google in November inked the most notable lease in the building, taking 300,000 square feet, moving some of its operations from 1440 Broadway at 39th Street to the more fashionable address.
Like most of the few new office projects under construction throughout the rest of Manhattan — the Hearst or New York Times headquarters buildings in Midtown, for example — new projects in Chelsea and the Meatpacking District are being built with particular tenants already lined up to occupy the buildings.
The flashiest new addition will be the Frank Gehry-designed headquarters of IAC/InterActive Corp. at the site of a former truck garage near the West Side Highway at 540 West 19th Street. The building will bring together six offices of the Internet and retail company headed by Barry Diller, which includes LendingTree.com, Ticketmaster, Match.com, and other businesses.
The 10-story, 200,000-square-foot glass tower, with diagonal walls and tilted columns reminiscent of other Gehry projects, will have an irregular design intended to mimic the sails of boats making their way along the Hudson River, according to a recent story in the Wall Street Journal. A video screen will also run the length of the building displaying the logos of the company’s different brands. The building, being developed by the Georgetown Company, is expected to open in March 2007.
A few blocks south, in the Meatpacking District, developer Charles Blaichman, who has been instrumental in reshaping the area, has several projects in the works, one of which, like the IAC headquarters, is being built on a non-spec basis.
At 36-40 Gansevoort Street, a 60,000-square-foot new development currently under construction will house the offices, showroom, and a retail store for clothing designer Theory. In a sign of the popularity of the neighborhood, Blaichman has already put his 49-year leasehold on the site up for sale even though the project isn’t yet built, the New York Post reported. The deal could fetch north of $30 million, according to brokers.
Blaichman is also developing the High Line Building at 450 West 14th Street between Washington Street and 10th Avenue, which will contain 80,000 square feet of office space and 20,000 square feet of retail, being marketed by Sinvin Realty.
The building consists of a brick warehouse with an eight-story glass addition on top, all fronting on the soon-to-be-revamped High Line, where many residential projects are also rising. Blaichman’s other project, being developed next door, is 446 West 14th Street, an existing building which has 22,000 square feet on four levels available as offices or retail space, according to Sinvin.
One block east, at 401-03 West 14th Street, the Western Beef Building, notable for that company’s bright orange awning in the middle of the major Meatpacking District crossroads, is being converted into a 65,000-square-foot office and retail space by Taconic Partners. The Western Beef supermarket is reportedly moving to somewhere around 16th Street and Ninth Avenue, according to Community Board 2.
While developers like Blaichman, also a partner in redeveloping the building that houses the exclusive Soho House at 29-35 Ninth Avenue, were early to the area, other developers appear to be catching on to both the Meatpacking District and Chelsea.
“It’s remarkable how quickly how the entire Chelsea district has gotten on the radar of all the big developers,” said Stuart Siegel, managing director Grubb & Ellis.
Siegel is brokering new units at the Chelsea Arts Tower, which represents a different approach to commercial development. The 20-story tower under construction at 25th Street and 11th Avenue is a commercial condominium, where developers are selling the office space in individual units rather than leasing it out in the traditional manner.
The property, scheduled to be completed in August, is targeting art dealers, private collectors, and other creative industries like fashion, photography, public relations, and architecture. Units have been going for $750 to $1,200 per square foot, and the building is already 60 percent sold out.
The glass and concrete high-rise will house art galleries on its bottom eight floors and office tenants on its upper floors, and floor sizes in the building range from 3,100 to 4,700 square feet, meaning prices start from around $2.3 million and go as high as $5.6 million.
“We came up with the concept because we’ve been active in the neighborhood for a long time, and five times a week, we got calls from people asking, ‘can I buy office space?'” Siegel previously told The Real Deal.
Companies that plan to stay in the same place and expect to stay the same size, including non-profit foundations, are among likely candidates to buy, he said.
Still, for companies looking to go the traditional leasing route in Chelsea and the Meatpacking District, rents are cheap compared to more staid and established locations like Midtown. The average asking rent for office space in Chelsea grew 6 percent year-over-year, to $28.54 a square foot in January, according to Colliers ABR, making it a bargain compared to Midtown, where average rents stood at $50.24.